Shangri-La Hotels signs new management agreement

PETALING JAYA: Shangri-La Hotels (M) Bhd (SHMB), via its wholly owned subsidiary, Shangri-La Hotel (KL) Sdn Bhd (SLKL), has entered into a new hotel management agreement (HMA) with Shangri-La Hotel Management (MY) Pte Ltd (SLMY).

Under the new HMA, SLMY will provide hotel management, sales, marketing and reservation services to SLKL for a term of five years effective Jan 1, 2024.

SLKL may choose to extend under the same conditions for an additional five years, and either party may then choose to extend for a further five years with mutual consent.

In a filing with Bursa Malaysia, the hospitality group controlled by the Kuok Group said the deal enables SLKL to take full advantage of the “Shangri-La” brand and its vast worldwide network for sales and marketing.

It also allows the hotel to continue benefiting from Shangri-La’s management and marketing expertise and experience.

The total fees payable to SLMY for the first five-year term, including the base management, incentive management and sales and marketing fees, is RM35.02mil, representing 4.5% of the audited net assets of SHMB as of Dec 31, 2023.

The main terms of the new HMA include a fixed percentage per annum of gross operating revenue (GOR) for its base management fee and sales and marketing fee.

Meanwhile, its incentive management fee consist of a fixed percentage per annum of adjusted gross operating profit (GOP).

The base management and marketing fees are each within the range of comparable major hotel chains in Malaysia for the respective fee component.

Meanwhile, for the incentive management fee, SHMB said, it is much lower than the range of comparable major hotel chains in Malaysia.

According to a statement by the board, the management believes the percentage of management and marketing fees over GOR and GOP payable under the agreements is well within the range of the market benchmark.

Shangri-La Asia Ltd is the ultimate holding company of SHMB, owning about a 52.78% stake in SHMB.